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The Beginning of a Bitcoin Bull Run?

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bitcoin bull run

The Beginning of a Bitcoin Bull Run?

After 15 months of losses and stagnation, Bitcoin has made a miraculous recovery — rising more than 150% from its lowest point in December 2018.

In its heyday, Bitcoin had surpassed $10,000 in early December 2017, before briefly crossing the $20,000 mark for a single day on December 17th. A year later, the digital currency had fallen back to Earth, dropping below $3,200.

Now that the dust of that wild speculative frenzy has settled, Bitcoin is back on the upswing. What could be causing this most recent surge in growth?

We look at four possible explanations for the Bitcoin bull run, as originally outlined by Aaron Hankin at MarketWatch:

Technical Milestones

Bitcoin has seen several technical milestones this year, such as surpassing the psychological barrier of $5,000 in early 2019, breaking the 200-day moving average, and scoring the golden cross (when the 50-day moving average crosses above the 200-day moving average).

Widespread Adoption

Bitcoin is experiencing a steady increase in adoption across several markets. The term Bitcoin has become a household name — even if people don’t understand what it does, they know what it is.

Companies such as Starbucks, Microsoft, and Amazon, and Nordstrom are looking for ways to integrate cryptocurrencies into daily transactions for faster payment clearance, innovative rewards programs, and efficient customer service interactions.

bitcoin merchants

Shifting Sentiments

Bitcoin has possibly seen a shift in public perception. There have been fewer negative articles about Bitcoin and cryptocurrencies, and the news stories that are negative no longer have as big of an impact as they once did.

When Binance announced hackers stole $40 million in bitcoin and when accusations of an $850-million cover-up were leveled against Bitfinex and Tether, the Bitcoin bull run barely flinched and continued to climb.

Wavering Gold Investment

Investor confidence in gold has been more stagnant in recent times. To capitalize on this, Grayscale Investments (of Digital Currency Group) posted a campaign in May 2019 promoting Bitcoin as an ideal alternative to gold because it is borderless, secure, and more efficient for storing value.

Despite the World Gold Council’s response denying those claims, the Grayscale Bitcoin Trust saw OTC Markets Group’s highest trading volumes five days later.

Where to from here?

After a long skid, it appears Bitcoin is showing signs of life again. Bitcoin’s price can be highly volatile, so it remains to be seen whether this is the beginning of a bull run, or whether this is just another bump in the roller coaster ride.

Editor’s note: The price of Bitcoin has fallen to $7,100 at time of publishing and will likely continue to experience extreme volatility. However, even at a price of $7,100, this is still a 120% increase from lows in Dec 2018. As well, an earlier version of this graphic had incorrect dates on the timeline. That has now been corrected.

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Energy

Visualizing the Power Consumption of Bitcoin Mining

Bitcoin mining requires significant amounts of energy, but what does this consumption look like when compared to countries and companies?

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Visualizing the Power Consumption of Bitcoin Mining

Cryptocurrencies have been some of the most talked-about assets in recent months, with bitcoin and ether prices reaching record highs. These gains were driven by a flurry of announcements, including increased adoption by businesses and institutions.

Lesser known, however, is just how much electricity is required to power the Bitcoin network. To put this into perspective, we’ve used data from the University of Cambridge’s Bitcoin Electricity Consumption Index (CBECI) to compare Bitcoin’s power consumption with a variety of countries and companies.

Why Does Bitcoin Mining Require So Much Power?

When people mine bitcoins, what they’re really doing is updating the ledger of Bitcoin transactions, also known as the blockchain. This requires them to solve numerical puzzles which have a 64-digit hexadecimal solution known as a hash.

Miners may be rewarded with bitcoins, but only if they arrive at the solution before others. It is for this reason that Bitcoin mining facilities—warehouses filled with computers—have been popping up around the world.

These facilities enable miners to scale up their hashrate, also known as the number of hashes produced each second. A higher hashrate requires greater amounts of electricity, and in some cases can even overload local infrastructure.

Putting Bitcoin’s Power Consumption Into Perspective

On March 18, 2021, the annual power consumption of the Bitcoin network was estimated to be 129 terawatt-hours (TWh). Here’s how this number compares to a selection of countries, companies, and more.

NamePopulation Annual Electricity Consumption (TWh)
China1,443M6,543
United States330.2M3,989
All of the world’s data centers-205
State of New York19.3M161
Bitcoin network -129 
Norway5.4M124
Bangladesh165.7M70
Google-12
Facebook-5
Walt Disney World Resort (Florida)-1

Note: A terawatt hour (TWh) is a measure of electricity that represents 1 trillion watts sustained for one hour.
Source: Cambridge Centre for Alternative Finance, Science Mag, New York ISO, Forbes, Facebook, Reedy Creek Improvement District, Worldometer

If Bitcoin were a country, it would rank 29th out of a theoretical 196, narrowly exceeding Norway’s consumption of 124 TWh. When compared to larger countries like the U.S. (3,989 TWh) and China (6,543 TWh), the cryptocurrency’s energy consumption is relatively light.

For further comparison, the Bitcoin network consumes 1,708% more electricity than Google, but 39% less than all of the world’s data centers—together, these represent over 2 trillion gigabytes of storage.

Where Does This Energy Come From?

In a 2020 report by the University of Cambridge, researchers found that 76% of cryptominers rely on some degree of renewable energy to power their operations. There’s still room for improvement, though, as renewables account for just 39% of cryptomining’s total energy consumption.

Here’s how the share of cryptominers that use each energy type vary across four global regions.

Energy SourceAsia-PacificEuropeLatin America
and the Caribbean
North America
Hydroelectric65%60%67%61%
Natural gas38%33%17%44%
Coal65%2%0%28%
Wind23%7%0%22%
Oil12%7%33%22%
Nuclear12%7%0%22%
Solar12%13%17%17%
Geothermal8%0%0%6%

Source: University of Cambridge
Editor’s note: Numbers in each column are not meant to add to 100%

Hydroelectric energy is the most common source globally, and it gets used by at least 60% of cryptominers across all four regions. Other types of clean energy such as wind and solar appear to be less popular.

Coal energy plays a significant role in the Asia-Pacific region, and was the only source to match hydroelectricity in terms of usage. This can be largely attributed to China, which is currently the world’s largest consumer of coal.

Researchers from the University of Cambridge noted that they weren’t surprised by these findings, as the Chinese government’s strategy to ensure energy self-sufficiency has led to an oversupply of both hydroelectric and coal power plants.

Towards a Greener Crypto Future

As cryptocurrencies move further into the mainstream, it’s likely that governments and other regulators will turn their attention to the industry’s carbon footprint. This isn’t necessarily a bad thing, however.

Mike Colyer, CEO of Foundry, a blockchain financing provider, believes that cryptomining can support the global transition to renewable energy. More specifically, he believes that clustering cryptomining facilities near renewable energy projects can mitigate a common issue: an oversupply of electricity.

“It allows for a faster payback on solar projects or wind projects… because they would [otherwise] produce too much energy for the grid in that area”
– Mike Colyer, CEO, Foundry

This type of thinking appears to be taking hold in China as well. In April 2020, Ya’an, a city located in China’s Sichuan province, issued a public guidance encouraging blockchain firms to take advantage of its excess hydroelectricity.

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Bitcoin

Bitcoin is Near All-Time Highs and the Mainstream Doesn’t Care…Yet

As bitcoin charges towards all-time highs, search interest is relatively low. How much attention has bitcoin’s recent rally gotten?

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Bitcoin Near All-Time Highs vs. Search Interest

Just about every financial asset saw a huge drop in March, but few have had the spectacular recovery that bitcoin has had since then.

Up more than 300% from the March lows, bitcoin is within $1,000 of its all-time high ($19,891) established three years ago. While 2017’s run-up saw a huge surge in Google searches, interest this time around is less than a quarter of what it was back then.

This graphic overlays bitcoin’s price changes against Google search interest for “bitcoin” between 2017-Nov 2020, showing the muted relative search interest for its recent rally. Despite Google search interest being low, it is turning upwards, potentially hinting at a rise to cap off 2020.

Nobody’s Searching? Maybe Bitcoin is Already Mainstream

Bitcoin’s mainstream attention in 2017 was exceptional, and was likely the first time many people had even heard about the digital asset.

After doing all of their Google research back then, it’s possible that the general population is now well aware of the cryptocurrency and doesn’t need to search up the basics again. Add to this that bitcoin is now easily purchasable through popular services like Robinhood and Paypal, and you have fewer people who need Google to figure out the intricacies of bitcoin wallets and transactions.

While people might not be searching for information on bitcoin, the media has certainly picked up on its movement over the past year. Mainstream coverage regarding the cryptocurrency is currently at a relative all-time high for the past 12 months.

Mainstream Media Mentions of Bitcoin

Even if current mainstream coverage isn’t far from previous peaks, it’s still likely that people are seeing an increase in bitcoin content in their news feeds following the recent surge.

This rally is also attracting increased talk on social media sites like Twitter. That said, while there has been a rise in the volume of bitcoin-related tweets in November 2020, numbers are still quite low compared to the amount of tweets in 2017.

Tweets mentioning Bitcoin

Daily tweet volume reached above 60,000 recently, but is still far from the +100,000 daily tweets that were being sent at the top of 2017’s bull run.

Where in the World is Google Search Interest for Bitcoin?

Even if worldwide search interest isn’t as high as it was in 2017, there is one country where bitcoin is being googled more now: Nigeria.

Since 2015, the Nigerian Naira has lost more than 50% of its value against the U.S. dollar. This, coupled with the country’s high share of unbanked citizens means that alternative currencies and payment methods have steadily risen in popularity and utility.

Nigeria Bitcoin Google Search Trends

FinTech startups like Chipper Cash are providing Nigeria and other African nations with no-fee P2P payment services, along with the ability to trade bitcoin. The service is also beta testing the buying and selling of fractional shares of popular U.S. stocks.

Started up in 2018, Chipper Cash’s monthly payment values are now over $100 million, and the company has attracted investment from top VC funds like Bezos Expeditions as they provide a valuable service in an emerging market.

If Bitcoin is Mainstream, Where Does It Go From Here?

While bitcoin is proving itself to be a useful medium of exchange around the world, it’s still primarily a speculative asset. As 2020 saw massive increases in money supply across the board, bitcoin reacted best compared to other speculative assets, with its ascent to $19,000 almost completely uninterrupted since the $10,000 price area.

Time will tell if 2017 is set to repeat itself, or if bitcoin is getting ready to set new all-time highs going into 2021.

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